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Opportunity cost and employment effect of targeted emission reduction: an inter-industry comparison across countries

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  • Subhash C. Ray

    (University of Connecticut)

  • Chuang Li

    (University of Connecticut)

Abstract

All nations stand to benefit from addressing the problem of global warming caused by greenhouse gas emissions. However, the economic impact of pollution reduction in the form of a reduction in industry output and jobs lost will be different for different countries and across different industries. In this paper, we estimate the opportunity cost of emission reduction in terms of the loss of intended output and, collaterally, the effect on employment that would result from a reduction in the consumption of fuel for various industries of different countries by using the data constructed from the World Input–Output Database. We conceptualize industry-specific production technology for a number of manufacturing sectors with one intended output (industry gross value of production) and one undesirable output (CO2 emission) produced from labor, capital, and materials (treated as neutral input) and fuel (treated as the polluting input). A nonparametric Data Envelopment Analysis model following a by-production approach is employed. The results show that the cost of emission reduction in the basic metals industry is generally the lowest across countries in our sample, and the cost is generally high in coke and refined petroleum products among the observed countries.

Suggested Citation

  • Subhash C. Ray & Chuang Li, 2025. "Opportunity cost and employment effect of targeted emission reduction: an inter-industry comparison across countries," Empirical Economics, Springer, vol. 69(2), pages 755-785, August.
    • Handle: RePEc:spr:empeco:v:69:y:2025:i:2:d:10.1007_s00181-025-02749-6
    DOI: 10.1007/s00181-025-02749-6
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    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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